Module 5: Comping & Valuation
Avoid these costly errors that lead to bad ARV estimates and lost deals
Avoid these costly errors that can blow up your deals
The Problem: Using sales from 6-12+ months ago in a changing market.
Why It's Bad: Markets change. What sold for $250K last year might only be worth $230K today (or $270K in an appreciating market).
Solution: Only use comps sold within the last 90 days (180 days max in slow markets).
The Problem: Using a renovated 4-bed house as a comp for a distressed 3-bed property.
Why It's Bad: You're comparing completely different products. Buyers looking at renovated homes won't consider your distressed property.
Solution: Match condition levels. Use renovated comps for renovated properties, distressed comps for distressed properties.
The Problem: Using comps from across town, across a highway, or in a different school district.
Why It's Bad: Two houses 1 mile apart can be in completely different markets. School districts, crime rates, and neighborhood reputation matter.
Solution: Stay within 0.5 miles, same neighborhood, same school district. Don't cross highways or major economic boundaries.
The Problem: Using Zestimate or Redfin Estimate as your ARV without verification.
Why It's Bad: These algorithms can be off by $20K-$50K+. They don't account for actual condition, updates, or nuanced neighborhood factors.
Solution: Use Zillow/Redfin as a starting point, but verify with actual sold comps. Never make an offer based solely on an automated estimate.
The Problem: Ignoring that your comp is 300 SF larger or smaller than the subject property.
Why It's Bad: At $75/SF, that's a $22,500 difference. Your ARV will be way off if you don't adjust.
Solution: Calculate the price-per-square-foot for your market and adjust accordingly. (See "Making Adjustments" lesson.)
The Problem: Basing your ARV on what homes are listed for, not what they actually sold for.
Why It's Bad: Listing prices are often inflated. Homes typically sell for 3-5% below asking (sometimes more). You'll overestimate your ARV.
Solution: ONLY use actual sold data. Listings are for reference, not valuation.
The Problem: Finding one comp that sold for $280K and ignoring three others that sold for $240K-$250K.
Why It's Bad: You're creating confirmation bias. That high comp might have been an outlier (pool, premium lot, etc.).
Solution: Use at least 3-5 comps and average or weight them. Remove outliers, but don't ignore data that doesn't match your desired outcome.
The Problem: Using a comp without looking at the listing photos to verify condition.
Why It's Bad: A 3-bed/2-bath could be builder-grade with laminate counters OR fully renovated with quartz and custom cabinets. That's a $40K+ difference.
Solution: Always pull up listing photos. Verify finishes, condition, and quality before using a comp.
The Problem: Assuming that $50K in renovations will add $50K to the home value.
Why It's Bad: Not all upgrades return dollar-for-dollar value. A $15K pool might only add $10K in value (or nothing in a budget neighborhood).
Solution: Research what upgrades actually add value in your specific market. Use conservative estimates.
The Problem: Not recognizing if the market is appreciating, flat, or declining.
Why It's Bad: If prices are dropping 2% per month and your comp sold 4 months ago, it's now worth 8% less. Your ARV is inflated.
Solution: Talk to agents, track market trends, and adjust your comps for appreciation or depreciation trends.
When in doubt, be conservative.
It's better to underestimate ARV by $10K and pass on a deal than overestimate by $10K and lose money. Conservative comping protects your profit margins.
Problem: Relying on sales from 6+ months ago in a changing market
Markets shift constantly. A comp from 8 months ago doesn't reflect today's values, especially if the market is rising or falling.
Solution:
Problem: Using comps from a better or worse area than your subject property
A house 2 miles away across a highway might look similar on paper but could be in a completely different market. School districts, crime rates, and neighborhood desirability vary drastically.
Solution:
Problem: Comparing a fully renovated comp to a distressed property without major adjustments
This is THE biggest mistake. Two identical 3/2 homes can differ by $50,000+ based solely on renovation level. Never assume "3 bed 2 bath 1,500 SF" means they're comparable in value.
Solution:
Problem: Taking comp values at face value without adjusting for differences
Beginner mistake: seeing a similar house sold for $250K and assuming your ARV is $250K, even though the comp has a pool, extra bedroom, or larger square footage.
Solution:
Problem: Using automated valuation tools as your primary comp source
Zillow, Redfin, and other AVMs are algorithms - not appraisals. They're often off by $20K-$50K+, especially for distressed properties or in neighborhoods with high variation.
Solution:
Problem: Comparing to asking prices instead of actual sold prices
An "asking price" is wishful thinking. A "sold price" is reality. Active listings tell you what sellers WANT, not what buyers will PAY.
Solution:
Problem: Ignoring how long comp properties took to sell
If a comp sold in 3 days, it was priced right (or under market). If it took 120 days, it was probably overpriced and eventually discounted. Both matter.
Solution:
Problem: Rounding up or "hoping" for best-case ARV scenarios
Wanting a deal to work doesn't make it work. Optimistic ARV = overpaying = bad deal = angry buyer = no repeat business. Hope is not a strategy.
Solution: